Katie Stockton says this toy stock is poised to outperform rival in the months ahead
Mattel (MAT) and Hasbro (HAS) are the two largest publicly traded companies in the children’s toy industry. For those interested in investing in this segment of the market, technical analysis is useful in determining which of the two stocks may be better positioned. Long/short equity fund managers often pair the two stocks against each other, contributing to their sometimes-divergent trends. HAS launched a cyclical uptrend late last year, clearing resistance from its weekly cloud model in April in a long-term bullish development. The upward sloping cloud and 40-week moving average suggest that the primary trend is bullish. However, in response to its recent earnings report, HAS flashed intermediate-term ‘sell’ signals from the DeMark Indicators and the MACD. We see this as a setback for the stock over the next several weeks, increasing risk of deeper pullback. Support is near $61. Mattel’s outlook? Unlike HAS, a cyclical uptrend has yet to develop in MAT, but it recently cleared a long-term downtrend line and the weekly cloud in a bullish reversal. The breakout in MAT is associated with positive intermediate- and long-term momentum, evident in the weekly and monthly MACDs, both of which are conducive to upside follow-through in the coming weeks. Next major resistance for MAT is a 61.8% Fibonacci retracement level near $22.50. The cloud puts initial support near $19.40. While HAS was the first of the two stocks to reverse its long-term downtrend, it became overextended and appears to be giving over its leadership stronghold to MAT, which has a newer positive technical catalyst. The setup supports outperformance from MAT in the months ahead. This is reflected in the ratio of MAT to HAS , which has a confirmed counter-trend ‘buy’ signal and room to resistance. The 10-week MA has turned higher to indicate intermediate-term momentum has shifted in favor of MAT. In an uncertain market environment, this view may be best expressed via a “pair trade”, where a long MAT position is offset by a short HAS position, ideally with the backing of fundamental analysis. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. 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